Abstract

We employ cooperative bargaining theory and Nash's 'rational threats' idea to cast light on the biodiversity bargaining problem. The problem of global environmental
negotiations is argued to be of the nature of a bargaining problem, in which bargainers must agree on the distribution of cooperative surplus in order to move to the bargain-
ing frontier. We discuss the importance of both e¢ ciency (bargaining frontier) and fairness (recognition of characteristics of bargainers) in the choice of the appropriate contract. We show that the incremental cost contract, used to resolve the biodiversity bargaining problem, is of the form of an extreme point contract that fails to recognise the contributions of the South to the production of cooperative surplus. A rational response to such a contract is the use of threats of biodiversity destruction. Contracts must evince both e¢ ciency and fairness in order to represent lasting solutions.